Cheap, easy credit might have been tempting to young people in the past, but today’s millennials aren’t biting. According to a recent survey by Bankrate of over 1,161 consumers, 63 percent of adults ages 18 to 29 are living without a credit card of any kind, and another 23 percent only carry one card. But, why?
The Impact of the Great Recession
Research shows that the environment millennials grew up in might be having an impact on how they view the economy and their finances. Unlike other generations, millennials have lived through economic hardships during a time when their adult lives were just beginning. According to the Bureau of Labor Statistics, the Great Recession caused millennials to stray from historic patterns when it comes to purchasing a home and having children, and a fear of credit cards could be just another symptom of the economic environment of the times.
And there’s no shortage of data when it comes to proving that millennials have grown up on shaky economic ground. The Pew Research Center reports that as many as 36 percent of millennials were living at home with their parents in 2012. Meanwhile, the unemployment rate for people ages 16 to 24 was an astounding 14.2 percent (more than twice the national rate) in early 2014, according to the BLS. With figures like those, it’s no wonder that millennials are skittish when it comes to using credit cards as a form of payment. It make sense that young people would be afraid to take on any new forms of debt and opt to steer clear of temptation when they can.
A Generation Plagued with Student Loan Debt
But the Great Recession isn’t the only reason millennials could be fearful of cheap and easy credit. Many experts believe that the nation’s student loan debt level might have something to do with it. According to the Institute for College Access & Success, 71 percent of millennials (or 1.3 million students) who graduated from college in 2012 left school with at least some student loan debt, with the average amount owed being around $29,400. Students who attended for-profit colleges were even worse off; as the institute reports, the average debt load for these students was $39,950 in 2012.
With so much debt already under their belts, millennials are rightfully worried about adding any credit card debt to the pile. After all, many adults with student loan debt need to make payments for years, and even decades, to come. Why make it worse?
How Millennials Can Build Credit Without a Credit Card
The fact that millennials are smart enough to avoid credit card debt is a good thing, but that doesn’t mean the decision is without its drawbacks. According to Experian, most adults need a positive credit history in order to qualify for an auto loan or mortgage. Even worse, having no credit history is almost as bad as having a negative credit history in some cases.
Still, there are plenty of ways millennials can build a credit history without a credit card. A few tips:
— Make payments on installment loans on time. Whether it’s a car loan, student loan or personal loan, make sure to mail in those payment on time and pay at least the minimum amount required.
— Put at least one household or utility bill in your name. Paying your utility or household bills on time can help you build a positive credit history.
— Get a secured credit card. Unlike traditional credit cards, the funds secured credit cards offer are backed by money the user deposits. Signing up for a secured card is one way to build a positive credit history without any risk.
The fact that millennials are leery of credit cards is probably a good thing in the long run. After all, not having a credit card is the perfect way to stay out of credit card debt in the first place. Even though it might be harder to build a credit history without credit cards, the vast majority of millennials have decided that the plastic just isn’t worth it. And, who can blame them?
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Why Millennials Don’t Like Credit Cards originally appeared on usnews.com
